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Future Generations Fund: Botswana could Act on IMF advice

Dr Keith Jefferis

The International Monetary Fund (IMF)’s deep desire for Botswana to have policy to help the country prepare for a post – diamond future could become a reality this year.

The ‘new fiscal rule’ which commits 40% of mining revenue to be saved in a new future generation’s fund is likely to be effected this year, an economic review released by Dr Keith Jefferis has revealed.

Having a future generations fund is the government’s intention to create an annuity type fund where the country will receive a sustainable dividend that will continue long after the diamonds are gone.

This type of sovereign wealth fund is used by the best managed resource rich countries like Norway and Qatar that fully realise that their oil and gas revenues will be gone one day and given the amount of money in question know that they need to give the next generation a chance to benefit.

The government diamond revenue is expected to fall by 2026.

“One implication of this new rule is that the financing government expenditures will become more dependent on other revenue sources such as domestic taxation,’ said Jefferis.

He added that this will require improving the tax collection system and potentially increase tax rates.

There has been a strong argument as to why government has opted to take away 40% from the mineral revenue. By taking away 40% only 60% would be channeled towards the budget which would automatically force other areas of development to suffer.

“The new rule will also require stricter control of government spending particularly on development projects,” he said. This year’s development budget is set at P12.93 billion which will mainly be spent on infrastructure projects.

So far rough diamonds prices have been largely immune from the impact of global growth uncertainty and this has mitigated the general impact of commodity prices on Botswana. However this trend is uncertain how far this can be sustained given the declining polished diamonds prices.

In addition Jefferies highlighted the need for implementation of variety of reforms earmarked at improving doing business in Botswana that includes immigration reform to make the country more open to FDI and foreign skills.

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China’s GDP expands 3% in 2022 despite various pressures

2nd February 2023
China’s Gross Domestic Product (GDP) expanded by 3% year-on-year to 121.02 trillion yuan ($17.93 trillion) in 2022 despite being mired in various growth pressures, according to data from the National Bureau Statistics.

The annual growth rate beat a median economist forecast of 2.8% as polled by Reuters. The country’s fourth-quarter GDP growth of 2.9% also surpassed expectations for a 1.8% increase.

In 2022, the Chinese economy encountered more difficulties and challenges than was expected amid a complex domestic and international situation. However, NBS said economic growth stabilized after various measures were taken to shore up growth.

Industrial output rose 3.6% in 2022 over the previous year, while retail sales slightly shrank by 0.2% data show that fixed-asset investment increased 5.1% over 2021, with a 9.1% hike in manufacturing investment but a 10% fall in property investment.

China created 12.06 million new jobs in urban regions throughout the year, surpassing its annual target of 11 million, and officials have stressed the importance of continuing an employment-first policy in 2023.

Meanwhile, China tourism market is a step closer to robust recovery. Tourism operators are in high spirits because the market saw a good chance of a robust recovery during the Spring Festival holiday amid relaxed COVID-19 travel policies.

On January 27, the last day of the seven-day break, the Ministry of Culture and Tourism published an encouraging performance report of the tourism market. It said that domestic destinations and attractions received 308 million visits, up 23.1% year-on-year. The number is roughly 88.6% of that in 2019, they year before the pandemic hit.

According to the report, tourism-related revenue generated during the seven-day period was about 375.8 billion yuan ($55.41 billion), a year-on-year rise of 30%. The revenue was about 73% of that in 2019, the Ministry said.

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Jewellery manufacturing plant to create over 100 jobs

30th January 2023

The state of the art jewellery manufacturing plant that has been set up by international diamond and cutting company, KGK Diamonds Botswana will create over 100 jobs, of which 89 percent will be localized.

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Investors inject capital into Tsodilo Resources Company

25th January 2023

Local diamond and metal exploration company Tsodilo Resources Limited has negotiated a non-brokered private placement of 2,200, 914 units of the company at a price per unit of 0.20 US Dollars, which will provide gross proceeds to the company in the amount of C$440, 188. 20.

According to a statement from the group, proceeds from the private placement will be used for the betterment of the Xaudum iron formation project in Botswana and general corporate purposes.

The statement says every unit of the company will consist of a common share in the capital of the company and one Common Share purchase warrant of the company.

Each warrant will enable a holder to make a single purchase for the period of 24 months at an amount of $0.20. As per regularity requirements, the group indicates that the common shares and warrants will be subject to a four month plus a day hold period from date of closure.

Tsodilo is exempt from the formal valuation and minority shareholder approval requirements. This is for the reason that the fair market value of the private placement, insofar as it involves the director, is not more than 25% of the company’s market capitalization.

Tsodilo Resources Limited is an international diamond and metals exploration company engaged in the search for economic diamond and metal deposits at its Bosoto Limited and Gcwihaba Resources projects in Botswana.  The company has a 100% stake in Bosoto which holds the BK16 kimberlite project in the Orapa Kimberlite Field (OKF) in Botswana.

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